The Hidden PR Disaster That Led to Huawei's Crisis

Two external consultants who worked for Huawei in the U.S. and one American government official say a move by management to set up a lobbying outfit in the U.S. in 2009 without consulting its experts on the ground did immense damage.

Why you should care

The telecom giant always had a tough task in convincing the West it could be trusted. But it made its job even harder by not listening to key advisers.

By Kathrin Hille

The Daily DoseFEB 28 2019

It has been almost a year since William Plummer lost his job as the head of Huawei’s U.S. public and government relations department. But it is impossible for him not to get fired up as he sees how the Chinese telecommunications company has been dragged into a morass of suspicion by U.S. accusations that it is a security risk and a thief of commercial secrets. In particular, Plummer has been agonizing over Huawei’s handling of the crisis.

Earlier this week, Ren Zhengfei, the company’s founder, hit back at the allegations in two television interviews. He told the BBC that the U.S. would not be able to “crush” Huawei, adding: “If the lights go out in the West, the East will still shine … America doesn’t represent the world.”

For Ren, a reclusive former Chinese army engineer who rarely gives interviews, the public comments were the latest step in Huawei’s counteroffensive against an onslaught that threatens to damage its global business. The interview came ahead of Mobile World Congress (MWC), the telecom industry’s biggest annual trade show where the Chinese company has outshone rivals for years with enormous displays of its technological prowess and armies of marketing staff.

I’m not sure that being confrontational now is a good idea.

William Plummer, former PR adviser to Huawei in the U.S.

For Plummer, and other non-Chinese who have advised Huawei on its public relations strategy, however, Ren’s assertive tone is the wrong message at the wrong time.

“Five years ago would have been the time to do it. I’m not sure that being confrontational now is a good idea,” Plummer says.

U.S. President Donald Trump is expected to sign an executive order barring U.S. carriers from buying Huawei gear ahead of MWC, although the move would change little in practice: Government pressure on American carriers not to buy from Huawei and moves to derail investments by the Chinese group in U.S. companies has ensured that an 18-year quest to break into America has largely gone nowhere.

But Washington is also pressuring allies to shut Huawei out of their markets for security reasons and is going after the company with criminal charges that could land Meng Wanzhou, chief financial officer and Ren’s daughter, in jail. She is under house arrest in Canada, after U.S. authorities filed an extradition request over allegations that the company violated sanctions against Iran. The company and Meng deny the charges.

“This rolling thunder holy jihad they have been on over the past year makes it impossible for any government relations person to do a meaningful job,” says a senior executive at a lobbying firm that worked for Huawei until last year. “Things are made worse by Huawei themselves — the best you get is crisis management, but there has never been a consistent, strategic approach to managing their image.”

It was not for lack of advice, according to several PR specialists who have worked with the company.

From the 1990s, Huawei enlisted some of the most illustrious Western consultants: IBM to help modernize management; Bain Capital as a partner for U.S. acquisitions; and the Cohen Group, an advisory founded by former Secretary of Defense William Cohen, to help deal with U.S. government security concerns. It also employed a vast array of global PR companies, from Ogilvy to Edelman to BCW.

But at crucial moments, the company did not heed their advice and even outmaneuvered the consultants it had hired, according to former executives and external consultants. “There was always a fundamental lack of trust in non-Chinese. You offer guidance, and are regularly second-guessed,” Plummer says.

Two external consultants who worked for Huawei in the U.S. and one American government official say a move by management to set up a lobbying outfit in the U.S. in 2009 without consulting its experts on the ground did immense damage. The company, which was vying for contracts to upgrade U.S. telecom operator Sprint’s mobile network, offered to deliver its products through an independent third party that would probe its software and hardware for security flaws and hold Huawei’s source code, the key software component, in an attempt to offer more transparency.

At the same time, however, the Cohen Group was discussing with the director of national intelligence to use such mechanisms for trusted delivery of Huawei gear that would assuage U.S. security concerns. When Huawei announced its own structure instead — a company called Amerilink, which would be led by William Owens, a former vice chairman of the U.S. Joint Chiefs of Staff — that potential deal fell apart over concerns that the new entity was not sufficiently independent. “There was a chance to build trust, but when Huawei made that sudden move, it was perceived like they had decided to go for window dressing instead, and they destroyed all trust,” says a person familiar with the Cohen Group’s talks.

Such incidents are not an exception. In a book published last September, Plummer described how senior local staff in foreign markets are regularly excluded from key decisions. At the same time, Chinese executives are constantly second-guessing senior management in local markets out of fear of Ren, injecting confusion into the company’s handling of PR and lobbying abroad. Plummer also wrote that his warning of how to deal with allegations that the company and Meng had violated U.S. sanctions against Iran were ignored.

“I received no response or reaction to the concerns I expressed and was effectively iced out of the loop,” he wrote, adding that he “had touched on topics that were off-limits.”

The deep divide between Chinese and foreign staff, corroborated by employees in five countries, is not coincidental. In internal meetings, Ren advises staff to represent the company in different terms in China and abroad.

“The core of public relations is the truth, and we therefore must convey the truth at all times. Correctly define Huawei’s identity and ‘who we are,’” the company founder told executives in 2014, according to Plummer and current and former Huawei executives. “In China, state that Huawei strongly supports the Communist Party of China. Outside China, stress that Huawei always follows key international trends.”

Huawei said it was not aware of Ren having said this.

During the current geopolitical standoff between the U.S. and China, this chasm between the company’s inner workings and the image it is trying to project in the West has only grown wider. A local executive at Huawei in a European country says China’s increasing power and the growth of Chinese companies had bred arrogance and at times aggression among Chinese, including Huawei staff.

Huawei says the low profile it had kept in the past has lent credence to the perception that it is secretive. “We will continue to let facts speak for themselves but strive to better explain what we are doing to connect people and improve technology,” a spokesperson says.

In a recent meeting with German journalists, Eric Xu, one of Huawei’s rotating CEOs, explained: “Our PR department is asking Huawei executives to speak up about who we really are and what we do. So here we are, even though we are not sure whether this can really work or not.”

But for Plummer, it may be too late for Huawei to rescue the situation.

“Cut a deal, perhaps buy a pillow factory in Detroit, go to CFIUS [Committee on Foreign Investment in the United States] and sign a national security agreement that would give the U.S. government remarkable visibility inside the company, allow them to name members to an independent board in the U.S., etc.,” he says, as suggestions for Huawei’s executives. “If you get the U.S. boot off Huawei’s neck, all these other markets would be fine. [But] I don’t know if it’s even possible anymore.”